March 21, 2014 6:37 pm

Putin feels the heat as sanctions target president’s inner circle

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Russian President Vladimir Putin (C) signs documents as Sergei Naryshkin (R), speaker of the State Duma, Russia's lower parliament house, and Valentina Matviyenko, head of the Federation Council, look on during a ceremony in Moscow's Kremlin March 21, 2014. Putin signed legislation on Friday that completed the process of absorbing Crimea into Russia, defying Western leaders who say the Black Sea peninsula remains part of Ukraine. REUTERS/Mikhail Klimentyev/RIA Novosti/Kremlin (RUSSIA - Tags: POLITICS TPX IMAGES OF THE DAY) ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. IT IS DISTRIBUTED, EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS©Reuters

President Vladimir Putin signs laws completing Russia's annexation of Crimea. Sergei Naryshkin, right, speaker of the Duma, and Valentina Matviyenko, head of the Federation Council, witness the signing

Close watchers of the Russian political scene were in no doubt on Friday that by sanctioning a bank and 16 officials and businessmen closely linked to President Vladimir Putin, Washington had struck at the core of Moscow’s leadership.

“It was the first serious step taken by the west” over the Ukraine crisis, said Andrei Piontkovsky, a political analyst from the Russian Academy of Sciences and longtime Putin critic. “These are members of Putin’s personal gang. These sanctions . . . hurt Putin personally, because these guys are running his financial empire.”

The president's men

The president's men

One senior banker with ties to the Kremlin suggested the US was “going for regime change in Russia” – though the EU held back from sanctioning the same people.

EU and US sanctions list: profiles of the targets

Protestors at the Crimea in Ukraine

The US and EU this week ratcheted up the pressure on Russia over the crisis in Crimea, imposing sanctions on leading figures close to President Vladimir Putin. Here is a list of short profiles of those blacklisted.

By claiming that the president owned a stake in oil trading firm Gunvor, until this week 43 per cent owned by Gennady Timchenko, one of the blacklisted Russians, the US echoed charges long made by critics and Russia’s opposition that the Kremlin is in part a moneymaking outfit.

Many of those targeted have links with Mr Putin going back to the 1990s when he was deputy mayor of St Petersburg; some go even further. Several were partners with the future president in a lakeside community of “dachas”, or country houses, an hour and half’s drive from Russia’s second city.

The key figures fall broadly into two groups. First are the so-called “Putin oligarchs”. Their names are less well known, especially outside Russia, than the original “oligarchs” who amassed wealth and political power under president Boris Yeltsin in Russia’s questionable privatisations of the 1990s.

But many Russians see them as combining wealth and links to the top leadership, as their 1990s predecessors did. They include Mr Timchenko, as well as Yuri Kovalchuk – a member of the dacha community who became leading shareholder of Bank Rossiya, founded in St Petersburg in 1990.

The bank, which has long been seen as closely linked to Mr Putin’s inner circle, has in recent years accumulated a sizeable indirect stake in Gazprombank, now Russia’s third-largest lender. It also has stakes in Russia’s Channel 1 and NTV, broadcasters that have been central to the Kremlin’s propaganda campaign around Russia’s annexation of Crimea.

Then there are Arkady and Boris Rotenberg, judo partners from the president’s youth. They have become billionaires as leading construction contractors to Gazprom, the state-controlled natural gas giant, and the $50bn Sochi Winter Olympics. All have firmly denied that their business success owes anything to their acquaintance with Mr Putin.

A second group includes members of the so-called siloviki, or hardline ex-secret servicemen around the president. They include Sergei Ivanov, Mr Putin’s chief of staff and a longtime KGB colleague, as well as Viktor Ivanov, a former deputy head of the Kremlin administration and another ex-KGB man.

In depth

Battle for Ukraine

In depth: pro-EU Ukrain rallies

Russia has annexed the southern Ukrainian peninsula of Crimea, raising fears of a return to the politics of the cold war

The two groups are perceived as part of a decision-making group around the president that, harking back to the old supreme body of the Soviet Communist party, have been called a new “politburo” by some analysts.

Despite their wealth, the “Putin oligarchs” do not have tentacles running through Russia’s economy – which Mr Piontkovsky suggested made the US sanctions well targeted.

“They will be more efficient than full-scale sanctions on different sectors of the Russian economy, because they hurt the right people – the people who make the decisions,” he said. “Our slogan has been, don’t punish 140m Russians, punish 140 oligarchs.”

He suggested their appearance on the sanctions list could also “create friction and resentment” in the inner circle.

But Nikolai Petrov, a political analyst who has studied Russia’s power structures, said that while the sanctions were cleverly constructed, they might have the effect of consolidating those around Mr Putin.

“What is needed for Putin is to put all his elite within this besieged fortress, and to be able to control them and avoid any opportunity for them to escape,” he said.

Splits within Russia’s elites that could threaten the president’s position were more likely to occur if other oligarchs, not part of Mr Putin’s decision-making circle, were targeted, Mr Petrov added. If Moscow escalates its intervention in Ukraine, those sanctions could yet come.

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